Indian Bank hits over 4-year high; gains 4% in weak market post Q1 results

Shares of Indian Bank hit an over four-year high of Rs 341.90, gaining 4 per cent on the BSE in Friday's intra-day trade, in an otherwise weak market, after the lender reported healthy results for the June quarter (Q1FY24) with 41 per cent year-on-year (YoY) jump in net profit at Rs 1,709 crore.

The stock of the public sector bank hit its highest level since August 2018. It had hit a record high of Rs 428 on November 17, 2017, BSE data shows.

The strong net profit growth during the quarter was on the back of 26 per cent YoY rise in net interest income (NII) at Rs 5,703 crore and treasury gains, along with moderation in credit cost. The bank's advances grew 13 per cent YoY at Rs 4.79 trillion. Net interest margin (NII) improved to 3.61 per cent from 3.1 per cent in the year ago quarter.

The bank's asset quality improved led by a decline in slippages to Rs 1,850 crore (~1.8 per cent annualized). Gross non-performing assets ratio (GNPA) improved by 266 bps YoY to 5.47 per cent in Q1FY24 from 8.13 per cent in Q1FY23, NNPA ratio improved by 142 bps YoY to 0.70 per cent from 2.12 per cent in the year ago quarter.

Indian Bank reported a healthy performance with in-line earnings, supported by margin expansion and healthy loan growth, particularly in the Retail, Agri, and Corporate segments.

Moderation in slippages, coupled with healthy provision coverage ratio (PCR) at 87.8 per cent is expected to keep credit cost lower. Anticipated healthy growth and steady margins could drive improvement in RoA ahead, ICICI Securities said in a note.

The bank expects the growth trend to remain healthy going ahead. Asset quality improved with reduction in slippages and healthy recovery/upgrades. Deposit growth was modest and CASA witnessed a moderation. Although the Restructured witnessed some moderation, it remains elevated. Additionally, the increase in the SMA book has prompted us to keep a close watch on the asset quality closely, Motilal Oswal Financial Services said in the result update.